Correlation Between Vipshop Holdings and MercadoLibre
Can any of the company-specific risk be diversified away by investing in both Vipshop Holdings and MercadoLibre at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Vipshop Holdings and MercadoLibre into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Vipshop Holdings Limited and MercadoLibre, you can compare the effects of market volatilities on Vipshop Holdings and MercadoLibre and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Vipshop Holdings with a short position of MercadoLibre. Check out your portfolio center. Please also check ongoing floating volatility patterns of Vipshop Holdings and MercadoLibre.
Diversification Opportunities for Vipshop Holdings and MercadoLibre
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between Vipshop and MercadoLibre is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding Vipshop Holdings Limited and MercadoLibre in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MercadoLibre and Vipshop Holdings is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Vipshop Holdings Limited are associated (or correlated) with MercadoLibre. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MercadoLibre has no effect on the direction of Vipshop Holdings i.e., Vipshop Holdings and MercadoLibre go up and down completely randomly.
Pair Corralation between Vipshop Holdings and MercadoLibre
Given the investment horizon of 90 days Vipshop Holdings Limited is expected to under-perform the MercadoLibre. But the stock apears to be less risky and, when comparing its historical volatility, Vipshop Holdings Limited is 2.14 times less risky than MercadoLibre. The stock trades about -0.18 of its potential returns per unit of risk. The MercadoLibre is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 205,609 in MercadoLibre on August 27, 2024 and sell it today you would earn a total of 4,446 from holding MercadoLibre or generate 2.16% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Vipshop Holdings Limited vs. MercadoLibre
Performance |
| Timeline |
| Vipshop Holdings |
| MercadoLibre |
Vipshop Holdings and MercadoLibre Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Vipshop Holdings and MercadoLibre
The main advantage of trading using opposite Vipshop Holdings and MercadoLibre positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Vipshop Holdings position performs unexpectedly, MercadoLibre can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in MercadoLibre will offset losses from the drop in MercadoLibre's long position.| Vipshop Holdings vs. JD Inc Adr | Vipshop Holdings vs. Alibaba Group Holding | Vipshop Holdings vs. Sea | Vipshop Holdings vs. Jumia Technologies AG |
| MercadoLibre vs. PDD Holdings | MercadoLibre vs. JD Inc Adr | MercadoLibre vs. Alibaba Group Holding | MercadoLibre vs. Global E Online |
Check out your portfolio center.Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio File Import module to quickly import all of your third-party portfolios from your local drive in csv format.
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